Next Generation Procurement: The Foundation for Superior Collaboration and Efficiency

Communities must embrace innovative operational procurement models that feature innovative tools and systems as part of the end-to-end procurement process.

By Xavier Hughes, chief technology and innovation officer, ICMA | Feb 11, 2020 | BLOG POST

Across America’s 39,000+ local governments, 19,000+ municipal governments, 16,000+ township governments, and 3,000+ county governments, one activity is a clear and critical constant—procurement. Public sector procurement in America is monumental in every facet. It powers our roads, bridges, highways, hospitals, school systems, buses, trains, subways, waterways, and many more. Procurement keeps operations moving, and in the process, supports each of our daily activities.

Currently, over $1.5 trillion is spent annually by state and local government and education agencies across the United States. And over $9.5 trillion globally. These are colossal figures. Compounding its economic significance is procurement’s operational complexity and labor investment that, more often than not, gets compounded by a lack of management and technical workflow sophistication, and the ability to generate sufficient traction in response to big and small procurement opportunities.

Adding to the complexity is each level of government’s unique take on procurement, ranging from the U.S. Government’s Federal Acquisitions Regulation (FAR), to individual states’ procurement manuals, and local governments’ procurement guidance policies and regulations.

For example, in Miami-Dade County, a community with a population exceeding 2.7 million people, procurement officials must adhere to the County’s Procurement Guidance Document and Best Practices Manual, its Cone of Silence, which prohibits certain oral communications regarding a particular RFP, RFQ or bid during the period the cone is in effect, its Code of Ethics, and finally, its supporting legislation.

Ensuring that proper collaboration takes place under these circumstances is paramount, yet incredibly complex. This is why communities must embrace innovative operational procurement models that feature innovative tools and systems as part of the end-to-end procurement process—from sourcing optimization to multidepartmental and regional government participation. They must also embrace the use of innovative processes around selecting suppliers and negotiating or putting contracts in place. 

Without a well-established procurement management process, and highly intuitive dual-facing procurement workflow, key procedural offenders, including complex documentation, high variability, and low visibility, will continue to impede success. Why? Because, for example, smaller vendors unfamiliar with the rules surrounding unique government procurement opportunities will continue to be unable to sell their services to government, creating an entry barrier for companies intending to enter the civic market. And more established and older companies that are more familiar with navigating the procurement process will continue to benefit from the “I am comfortable with them” angle. Yet many of these comfort companies tend to offer outdated and/or pricier equipment, services, or software.

Recently, Seth Rogers, managing director of Accenture, wrote about this very same issue, and put together a phenomenal approach to ensuring maximum efficiency, collaboration, and value. He broke down the challenge into three goals. Below is a summary of his findings and recommendations:

  • Effective ecosystem management. Organizations and their suppliers and partners must collaborate within a live and true dual-facing ecosystem. Vendors must be seen not only as suppliers but also problem solvers working in tandem with local government. According to a recent Accenture Strategy study, 81 percent of C-level executives agree that ecosystems allow their organization to grow in ways not possible without developing a partnership network.
  • Better governance. Chief procurement officers (CPOs) should use a variety of governance structures to improve supplier collaboration, including annual top-to-tops or quarterly business reviews. Creating a supplier relationship management (SRM) program can empower your supplier partners to play a more proactive and insightful role in ideation and delivery.
  • Innovation from a holistic view.  Procurement operations should form internal supplier councils around a given category, or for CPOs to share best practices externally in industry groups, creating a broader perspective of supply market capability. This model enables procurement operations to locate better supply sources and establish better terms, conditions, and compensation of suppliers. Challenging suppliers to invest in your partnership, or come to the table with original ideas, are often-underutilized tactics when forming these commercial relationships.
 

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